BMW's independent German dealers agree to sign new contracts

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The logo of BMW is pictured on a car during the 88th Geneva International Motor Show in Geneva, Switzerland, March 7, 2018. REUTERS/Denis Balibouse

FRANKFURT (Reuters) - BMW’s (BMWG.DE) association of independent German car dealerships advised its members to sign new long-term contracts with the carmaker before a deadline at the end of the month to avoid disruptions to the sale of cars and spare parts.

The agreement came hours ahead of a deadline that could have paralyzed distribution and service channels, and followed binding assurances from the carmaker that it would address the dealers’ outstanding concerns.

The carmaker had proposed new terms to the dealers in August that would have left them with significantly less income. The dispute with the dealers comes as global trade tensions and tougher emissions standards are pressuring BMW’s profitability.

“We recommend that our members sign the new contracts,” the leadership of the dealers’ association said in a statement issued on Friday evening.

The association, which counts 550 independent dealerships, said it would continue talks with the company to iron out remaining differences over the five-year contracts that will enter force on Oct. 1.

The dealers account for an estimated 11 billion euros ($13 billion) of BMW revenues, while the carmaker only directly owns 50 dealerships in Germany, the Sueddeutsche Zeitung reported this week.

BMW has said its pretax profit would fall this year and cut its profit margin guidance for cars, blaming intense price competition following the introduction of new emissions rules.